April 11, 2021

Exxon Mobil Will Keep Paying Its Dividend, And May Be Worth 30% More

 

XOM stock is worth over 30% more based on its historical yield, P/E, and P/Sales multiples

 


Exxon Mobil Corp. (NYSE:XOM) is not going to lower its dividend no matter what it costs the company. That point came out loud and clear from the company’s latest earnings conference call. This means that XOM stock will continue to have a “strong” dividend yield of about 6.15%. It’s worth at least 32% more, or $74.63 per share, based on its historical dividend yield.

 

For the past two years (8 quarters) Exxon has paid 87 cents per share in quarterly dividends. That works out to $3.48 per share each year. Exxon clearly intends to maintain that dividend. Therefore, at today’s price (April 9) of $55.87, the dividend yield is very healthy at 6.2%.

 

Target Price Based on Historicals

 

Moreover, based on the company’s historical dividend yield, this is much higher than its average. For example, Morningstar reports that over the past 5 years, its trailing 5-year dividend yield has been 4.96% (almost 5%).

 

We can use this to estimate the normalized target value for XOM stock. For example, if we divide the dividend per share of $3.48 by the average yield of 4.96%, the result is a target price of $70.16 per share. This represents a potential gain of $14.29 or about 26% more based on today’s price of $55.87.

 

 

We can do the same thing with the company’s earnings-per-share (EPS). Applying Morningstar’s 5-year avg. price-to-earnings (P/E) ratio of 25.62 times (over the last 5 years) to Exxon’s EPS for this year ($2.87) produces a target price of $73.53. That is over 30% above today’s price. Similarly using the Morningstar forward P/E average of 21.75 times Exxon’s $3.88 EPS for 2022 produces a target price of $84.39.

 

Continue reading …

 

No comments:

Post a Comment